All work and no play makes the Heritage Pay Team a dull bunch indeed. So this week, we start with a game. A guessing game: pick the false headline from the following:
Stonehenge Scientific Study: No One Living in Britain Today 'truly British'
UK Government Brexit Position Based on "pure illusion"
The Playboy Who Got Away With $242m – Using ‘Black Magic'
Trump: Give Guns to 1 Million Teachers to Stop Mass Shootings
None. We may live in the age of "fake news" but these stories are all true - as fact-checked by us. We live in weird or wonderful times - depending on where you sit; what you read or who you believe. One thing is unequivocal though: Ukip are in a state of disbelief at the first headline!
The week started on a sluggish note - both on the currency front and the news front. It wasn't until Thursday, that the currency market came alive again - and in spectacular fashion too.
First off was Canadian Retail Sales for December. The data showed a contraction of -0.8% against an expectation of 0.1% growth. As a result, the Canadian Dollar slumped to a 2-year low against the Euro, a 9-month low against Sterling, and a 2 month low against the greenback.
By evening the situation had taken a comedic turn because whenever Brexit is on the agenda, you can always count on the the current crop of politicians for some cheap laughs.
On Thursday afternoon, Prime Minister Theresa May and her Cabinet met at Chequers for a highly anticipated meeting that has been billed as the final articulation and clarification, of the UK's desired future relationship with the EU. The various facets of the Her Majesty's Government's favoured type of Brexit - depending on which Cabinet Minister is speaking - has ranged from Hard Brexit to Soft Brexit to Red-White-and-Blue Brexit - and everything in between. Hence the need for this clarity.
Finally, last night, after 8 hours of negotiating and compromising amongst themselves, Cabinet came up with a resolution defining a common position on Brexit. Unfortunately it is this same resolution that has been described by EU President, Donald Tusk as "pure illusion".
The buzz-word around the time of the EU Referendum in Britain was "Take Back Control". If "taking back control" is such a wonderful thing; what would happen if the EU decided to take back control too?
Nevertheless, Sterling breathed a sigh of relief, to the tune of about half a cent against the Euro after that meeting. This must have been because no-one resigned; which is good sign - considering the rate at which the government had been losing Cabinet Ministers lately. Talking of ministers, it seems no-one has told some of them, in their joy at winning concessions from fellow cabinet colleagues; that the real negotiation is with the EU. This will be a negotiation between a country with 3.2% of the world's GDP; against a trading bloc with an 18.3% share. Whose chances do you fancy in this fight?
Earlier in the day, the European Central Bank President, Mario Draghi accused the USA of engaging in a currency war by changing US' "strong dollar policy". This departure from the US' long standing commitment to effectively being in the dock for currency manipulation, seems to be a natural consquence of Donald Trump's view that the US is being "taken advantage" of. And this is therefore the administration's chosen route to improving the competitiveness of US exports. It is too early to tell but it is possible that there are likely to be interesting developments in this area, in the years and months ahead.
Having said that, adoption of a new policy to weaken the Dollar may have the unintended consequence of undermining the US Dollar's status as a reserve currency for central banks around the world. Furthermore, a weaker dollar could make the USA a less attractive destination for FDI (Foreign Direct Investment), which could cause interest rates to rise; resulting in a drop in share prices and other risky assets - creating an overall negative impact on the US' long term economic growth. Is this what President Trump wants? Well, who knows? He did after all suggest that 1 million US teachers be armed with guns, in readiness for any would-be mass shooters. Since mass shooters, in schools, tend to be either current students or former students; chances are they will know which teachers carry guns. An unintended consequence of arming teachers could therefore be, to make them targets whom the prospective mass-shooters would shoot first - whereas before they would have had an equal chance (of getting shot) as everyone else. But then again, with some people, you never really know whether "unintended consequences" are really unintended . . .
Finally, the story on the BBC website about the playboy who conned bankers out of £242m after promising to double their cash, reminds us of a piece of ancient advice: the fastest and safest way of doubling your money is to fold it in half and but it back in your pocket.
See you next week!
Next Week's Key Events (all times are GMT):
Mon 26th Feb 14:00 hrs: ECB President Mario Draghi speaks
Tue 27th Feb 13.30 hrs: Fed Chair Powell testimony
Wed 28th Feb 13.30 hrs: US Preliminary GDP - Quarterly
Thurs 1st Mar 09:30 hrs: UK Manufacturing PMI
Thurs 2nd Mar 15:00 hrs: Fed Chair Powell testimony
Thurs 2nd Mar 15:00 hrs: US Manufacturing PMI
Fri 2nd Mar (TIME UNSPECIFIED): UK Prime Minister May Speech
Fri 2nd Mar 09:30 hrs: UK Construction PMI
Fri 2nd Mar 10:00 hrs: BOE Governor Carney speaks
To discuss how the above may affect you, please contact your Currency Dealer at Heritage Pay on +44 (0) 203 858 7274.